PE/VCs pumped in $8.4 billion in Oct 2020, growth of 163% over Oct 19

 Private Equity/ Venture Capital investments in October 2020 stood at $8.4 billion as compared to $3.2 billion in October 2019, up by 163 per cent. In terms of deal value, October 2020 has been the best month ever for PE/VC investments. The significant jump in PE/VC investments was primarily on account of investments worth $3.3 billion made in Reliance Retail Ventures and investments in commercial real estate projects worth $3.6 billion announced by Blackstone and Brookfield.

According to the IVCA-EY report, October 2020 recorded nine large deals (value greater than $100 million) worth $7.6 billion compared to five large deals worth $2.2 billion in October 2019 and seven large deals worth $3.4 billion in September 2020.

The largest deals in October 2020 saw Brookfield acquire 12.5 million square feet of commercial space from RMZ Corp including its shared working space COWrks followed by Blackstone buying the rental income assets of Prestige Group for $1.6 billion. In addition, Reliance Retail Ventures received five large investments from a group of PE investors aggregating $3.3 billion.

Vivek Soni, Partner and National Leader Private Equity Services, EY said, October 2020 has been the best month so far with PE/VC investments exceeding $8.4 billion. This spike is primarily due to a couple of large $1 billion plus deals in the commercial real estate sector and the continuing inflow of PE investments into entities of the Reliance Group ($3.3 billion received by Reliance Retail Ventures in October 2020).

Year to date, 2020 has recorded $37.5 billion in PE/VC investments, just 5% below the numbers recorded last year for the same period. However, investments in Reliance Group entities account for 40% of these investments. Excluding this outlier, YTD PE/VC investments are 43% lower than the same period, last year.

From a sector point of view, real estate has emerged as the top sector with US$3.7 billion in investments across six deals, accounting for 44% of all investments in October 2020 and greater than investments received by the sector in the past 14 months combined on account of the two large deals mentioned above. Retail and consumer products was next in line with US$3.3 billion invested across seven deals followed by pharmaceuticals with US$706 million invested across four deals and financial services with US$297 million invested across 11 deals.

Exit activity continued to remain muted with October 2020 recording US$288 million in exits, mainly supported by deal activity in the open market segment. If the recovery in the capital markets becomes broader and mid-cap / small indices inch further upwards, we can expect to see a pickup in PE-backed IPOs and open market exit of PE positions in listed companies.

While the domestic economy has seen demand picking up to pre-Covid levels in some sectors helped by the festive season and pent-up demand, we are still not out of the woods as yet. Notwithstanding the investor thumbs up to the US election results, there are still concerns on global growth outlook especially with countries in the European region going into second round of lockdowns.

"We expect Indian PE/VC investing activity to remain circumspect and overweight towards larger transactions involving high quality assets in select sectorsm” said Soni.

In October 2020, buyouts was the largest deal segment with $4.4 billion recorded across eight deals (US$500 million across five deals in October 2019) mainly on account of the two large deals in the commercial real estate space noted above. Growth investments recorded $3.6 billion across 13 deals ($1.7 billion in October 2019). Start-ups recorded $318 million in investments across 58 deals ($655 million across 61 deals in October 2019).

PE, VC investments in India grew 28% to $48 billion in 2019, says EY data

Private equity and venture capital investments in 2019 were at an all-time high in terms of both value and volume. In terms of value, at $48 billion, PE/VC investments grew 28 per cent compared to $37.4 billion recorded in 2018.

According to EY data, the growth was mainly on account of significant investments in the infrastructure sector which alone accounted for 30 per cent of all investments in 2019 by value compared to 12 per cent in 2018.

The data included deals that were announced but are awaiting closure like ADIA, PSP and NIIF’s investment in GVK and others.

In terms of volume, 2019 recorded 1,037 deals, 35 per cent increase over from a year-ago period (769 deals in 2018), 60 per cent of which were in the start-up space. In terms of number of deals, start-ups recorded a 61 per cent increase in deal activity in 2019 compared to last year (378 deals in 2018).

While pure play PE/VC investments recorded a decline of three per cent, there was a significant increase in investments in the infrastructure and real estate asset classes which recorded an increase of 225 per cent and 33 per cent, respectively, on a y-o-y basis.

The year 2019 recorded the highest ever value of PE/VC investments in the infrastructure ($14.5 billion against $4.5 billion in 2018) and real estate ($6.1 billion against $4.6 billion in 2018) sectors.

For the first time, buyouts emerged as the primary PE/VC deal type, overtaking growth capital deals and accounting for 34 per cent of all PE/VC investments by value in 2019.

Buyouts recorded the largest increase of 56 per cent in terms of value ($16.2 billion in 2019 against $10.4 billion in 2018).

In the past two years, buyouts clocked $26.7 billion in deal value, which is more than the value of buyouts in the previous 12 years combined. Also, number of buyouts in 2019 (58 deals) are the highest ever. Once again, this has been driven by significant increase in the value (180 per cent increase y-o-y) and number (123 per cent increase y-o-y) of buyouts in the infrastructure and real estate sectors. Buyouts in the traditional PE/VC space, however, recorded declines in both value (26 per cent decline y-o-y) and volume (19 per cent decline y-o-y) in 2019.

Growth capital investments, at $14.5 billion, recorded modest increase of 9 per cent in 2019 against $14.2 billion in 2018. This too was primarily on account of increase in growth investments in infrastructure and real estate sectors which rose by 136 per cent ($7.3 billion in 2019 against US$3.1 billion in 2018) in terms of value and 97 per cent in terms of volume (59 deals in 2019 against 30 deals in 2018) respectively. Pure play PE/VC growth capital investments recorded a decline of 26 per cent in terms of value and 13 per cent in terms of volume.

Start-up investments in 2019 were the highest ever in terms of value and volume. 2019 recorded start-up investments worth US$7.9 billion, 22 per cent higher compared to US$6.5 billion in 2018. Softbank’s investment of US$810 million in OYO was the largest start-up investment in 2019.

There were 111 large deals (value greater than $100 million) in 2019, aggregating to $35.2 billion and accounting for 73 per cent of total PE/VC investments made in 2019 compared to 81 large deals aggregating $27.9 billion in 2018. The value and volume of large deals have been progressively increasing over the past four to five years.